Reports show slow recovery continuing

Industrial production unexpectedly shrank in January as factories took a breather after the biggest back-to-back gain in three decades.

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By Shobhana Chandra

capecodtimes.com

By Shobhana Chandra

Posted Feb. 16, 2013 at 2:00 AM

By Shobhana Chandra

Posted Feb. 16, 2013 at 2:00 AM

» Social News

WASHINGTON — Industrial production unexpectedly shrank in January as factories took a breather after the biggest back-to-back gain in three decades.

Output at factories, mines and utilities fell 0.1 percent after a 0.4 percent gain in December, figures from the Federal Reserve showed Friday in Washington. The median estimate in a Bloomberg survey called for a 0.2 percent rise. Manufacturing, which makes up 75 percent of total production, dropped after revised data for November and December showed the biggest two-month gain since 1984.

A pickup in consumer and business spending toward the end of 2012 and stabilization in overseas markets including China and Europe will help sales at companies such as Deere & Co. and Eaton Corp Plc. At the same time, a higher tax that is trimming Americans' paychecks and the risk of across-the-board cuts in federal outlays may prevent bigger gains in production.

"Manufacturing will advance slowly this year as long as demand keeps growing and nothing knocks the economy off course," said Guy Berger, an economist at RBS Securities Inc. in Stamford, Conn. Berger was the third-best forecaster of industrial production over the past two years, according to data compiled by Bloomberg. "Markets like China and Latin America will help to keep a floor under U.S. exports."

Manufacturing, which accounts for about 12 percent of the economy, dropped 0.4 percent last month after jumping 1.1 percent in December and 1.7 percent in November, the biggest back-to-back gain since January and February 1984.

The output of motor vehicles and parts decreased 3.2 percent after a 2.9 percent gain a month earlier, today's report showed. Excluding autos and parts, manufacturing production fell 0.1 percent after jumping 0.9 percent and 1.3 percent in the previous two months.

Automobiles are likely to be a source of strength this year, according to other reports. Cars and light trucks sold at a 15.2 million annual rate in January after 15.3 million in December, data from Ward's Automotive Group showed. Including November's 15.5 million rate, auto sales over the past three months have been the strongest in five years.

Some recent reports show an improving outlook.

The Institute for Supply Management's factory gauge advanced to a nine-month high of 53.1 in January.